April 2021 Portfolio Update

A stunning month with no holding down more than 5% and plenty of double-digit risers. I know that some people have legitimate fears about the market being frothy and prone to collapse. In some areas, particularly cryptocurrencies, I can see this. Overall though it feels as if a combination of lockdown easing and sustainable cost-cutting, leading to positive trading statements, is finally injecting some optimism into the wider UK stock market. With this backdrop I managed +8.6% for the month and am now +16.3% YTD which feels pretty healthy.

Looking at the winners and losers in my portfolio during April the stand-out winner is clearly Burford Capital with a more than 50% gain. Given that I halved my holding here last month, after the anaemic reaction to the results, it's a particularly galling outcome. The key lesson, as reiterated by Andy Brough, is that patience remains a key strength when investing. It's all too easy to chase the brightest, shiniest idea of the week but such an approach will never capture the lower frequency but higher amplitude movements in share prices.

Still I'm not complaining about Burford recovering or Alpha FX, and a host of other holdings, putting in double-digit gains. Some of these moves make sense to me, given the number of forecast-beating announcements, while others appear to reflect generally increased confidence in the mid-cap space. On the downside only Team17 and Calnex are worth talking about. These single-digit declines are very much within the expected range of volatility but if you like explanations it's possible that recent bearish comments have unsettled a few holders?

Finally May will see the third virtual StockSlam, with piworld and Stockopedia, at 6pm on Wednesday 19th. If you'd like to attend the event then please register here. It should be a lot of fun, as ever, with new investing ideas to ponder. Even better if you're interesting in presenting then please drop me a line. We're always looking for new presenters.

Risers: BUR 53%, AFX 26%, GMR 21%, LUCE 18%, FXPO 17%, BOTB 17%, K3C 15%, G4M 15%, STAF 13%, CCC 13%, RWS 13%, GAMA 11%, TND 10%, SLP 10%, BLV 9%, GAW 9%, PLUS 8%, BME 7%, DX. 6%, SCT 6%, SDG 5%, FNX 4%, DRV 3%, KNOS 2%, SPSY 1%, GAN 1%, VLX 1%, SUMO 1%

Fallers: CMCL -1%, TM17 -4%, CLX -5%


Clipper Logistics Bought at 669p

I last held Clipper Logistics briefly back in 2018 after presenting them at the very first Stockopedia StockSlam. At the time they had just taken on Boohoo as a new customer and appeared set to benefit from the growth of on-line shopping with forecast growth in the mid-20% range. The only factor that put me off a little was the low operating margin but that was about it. Unfortunately the following results were poorly received, the price slumped and I sold out at a loss. This was a good decision as it took the shares 2 years to close above my sale price. Since then the shares have taken off on the basis that they are a lockdown winner. Right at at the start of the pandemic Clipper won a contract to support the NHS supply chain and from that point supported existing clients switching to an online strategy and won further contracts. As a result trading strengthened and brokers steadily increased their FY estimates for both 2021 and 2022. In the last few months the pace has quickened with Farfetch, River Island, Mountain Warehouse and JD Sports signed up to Clipper's fulfilment services. These are significant names and their addition suggests that the company has proven its reliability and value over the past 12 months. With the price retracting a little after breaking out to a new high above 650p I figure that the risk:reward is good enough to take an initial position.

Cerillion Bought at 540p

I first encountered Cerillion just over 4 years ago and liked the look of the company apart from a few caveats. These were that it remained a minnow in a pool full of sharks and that it was looking to diversify from the telecoms sector but with limited success. Both points remain valid but since that meeting Cerillion has made steady progress in growing profits and retaining a decent return on capital invested in the business. Clearly there's money to be made providing CRM and billing software for global telecommunications providers and the 5G roll-out is helping to increase customer spend. Lately, since announcing the largest ever new contract [at the time] worth £11.2m in September, the shares have taken off on continued positive news-flow. Partly this is down to the back-order book reaching a record high of £31m. This consists of sales contracted but not yet recognised which makes it a strong leading indicator. Given that existing customers are sticky, generating lots of recurring revenue, these new sales will provide a continuing boost to revenues. Since then Cerillion has announced an even bigger new contract, of £13.3m, with a 10-year agreement in Latin America. Everything seems to be going the right way for Cerillion at the moment and the recent, positive trading update was enough for me to finally take a position.

Gear4music Bought at 843p

The board put out an excellent FY trading update this morning with EBITDA expected to be not less than £19.0m. This is a ~5% improvement on existing forecasts and EPS should come in at 52-53p (compared to 12.3p in FY20). While such extraordinary earnings won't be produced in FY22 I don't see why 30-35p isn't possible? The way I look at it is that the business has real momentum, it's proved that it can cope with the most trying economic conditions and customers are clearly happy to buy from Gear4music. So with the shares effectively treading water for the last 3 months I've decided to increase my holding by a third before they come out with any more good news.

UP Global Sourcing Bought at 163p

Back in 2019 I saw, and passed, on UPGS over concerns stemming from its recent listing. However six months later I was happy enough to invest only to sell within the month on fears around the Coronavirus outbreak in China. At the time I thought that the pandemic would be contained but if only I'd had the foresight to sell everything! Anyhow the board at UPGS proved more than up to the task of dealing with the ensuing disruption and issued a number of positive trading updates as the shares crept back up to my sale price. Perhaps this is the advantage of having founder management in place? This momentum has continued over the last six months with market expectations repeatedly beaten and debt reduced to a nominal level. It's a remarkable performance and the very recent interim results made me realise that UPGS still isn't expensive on a P/E of ~15 given that it's evolving from a supplier/distributor into a brand-management company. This will give the company more control over its own destiny as it sells into a variety of channels with reduced dependency on any single customer. Add on the fast growing online business, which accounted for 15.6% of revenues in H1 with a long-term target of 30%, and you're looking at a company with multiple growth drivers. Hopefully this time I'll be able to maintain my position for more than a month.


Tristel Sold at 642p - 52.4% gain

Here I've sold a third of my holding for a couple of reasons. One of these is that the shares have done very well out of the pandemic with the result being that they are the most highly rated share in my portfolio (with a P/E > 50). This isn't necessarily a sell signal but there has been a steady re-rating at Tristel over the last five years and this tailwind won't last for ever. At some point earnings growth has to catch up and that could easily happen if the company gains authorisation from the FDA - but that hasn't happened yet. Also the shares were a pig to sell, with fairly limited liquidity, although I was off-loading on a down day. For this reason I don't want my exposure to be too large just in case the market takes fright at the next trading update in July.

Plus500 Sold at 1535p - 40.7% gain

This has been a solid performer in my portfolio since I bought in last year with several material dividend payments. However despite being optically cheap the shares haven't made much progress in getting on for a year now because they're viewed as a Covid-19 winner. This is despite earnings forecasts for 2021 and 2022 rising steadily over this time against a backdrop of continued market volatility. So I've lightened my position here by 2/5 to release capital for potentially more attractive opportunities. It's only a small top-slice because I believe that Plus500 will continue to do well, as it matures into more of a financial services business, and I see scope for further chunky dividend payments out of free-cash flow.

Tristel Sold at 571p - 36.1% gain

I don't want to say that I'm prescient but I'm sure glad that I sold some of my Tristel holding a few weeks ago! This morning's unscheduled trading update made for unpleasant reading with high-margin sales badly impacted by the continuing NHS gridlock. The bottom line is that profits will likely come in 30% below expectations which is quite a hit and will make the shares look even more expensive. Now I have no doubt that sales will recover at Tristel, because they provide a valuable and recurring service, but there's no need for me to hang around while the recovery takes place. Frankly I was happy to get out with the shares down only 15% on the day.


Belvoir Group

Well these are a cracking set of results when you recall that management slashed their FY forecasts in half at the start of the pandemic. It turns out that their franchisees are far more flexible and determined than anyone expected and they worked their socks off to generate sales. Of course the stamp-duty holiday helped by boosting property sales but that isn't where Belvoir makes most of its revenue. Instead the bulk arises from lettings (60%) with the remainder coming from sales and financial services. As a result revenues rose 13% and PBT an excellent 20% as reduced overheads allowed the group to beat pre-Covid expectations. To drive growth going forwards management have a few different strategies. One is to buy and integrate smaller franchise networks which they've just done by acquiring Nicholas Humphreys for £4m in cash. This immediately adds around £2.8m to the top-line and the purchase consideration will be reduced when the board franchise out the three corporate owned agencies. In addition Belvoir has entered a strategic alliance with The Nottingham Building Society to run dual-branded offices which adds capacity at a low cost. Finally the strategy to pair financial advisers and franchisees is continuing apace with 141 of the group agencies now offering financial services. Frankly the future looks bright for Belvoir and this growth, along with very high quality metrics, is available at a bargain P/E of ~13 after 5 years of rating deflation. Yes, deflation! I find that fact remarkable but it does provide an opportunity for us private investors. (Results)


With this Q1 trading update we see, once again, the inherent volatility of a CFD operation. On one hand revenue is more than double that of Q4 2020 with EBITDA up more than 5x from $19.9m to $121.7m. Great news? Well yes but equally revenue is down 36% from Q1 2020 with EBITDA down 47% comparatively. Swings and roundabouts. More significantly 89,406 new customers signed up with the number of active customers a mighty 269,743 compared to 194,024 a year ago. These customer figures are important because each customer has a limited life-span and Plus500 has to keep feeding the funnel in order to stand still let alone grow. As a result even at this early stage the board expect FY revenue and EBITDA to be moderately ahead of the consensus. This is important because, for now, analysts are guessing that profits in 2021 will be half those generated last year. If the company manages to beat this prediction even moderately then the shares will look like a bit of a bargain given the hefty dividend supported by prodigious cash generation. While I've cut my position in Plus500 recently this update is enough to keep me engaged with the remainder of my holding. (Update)

K3 Capital

Just over a month ago K3 Capital informed us that they were trading ahead of expectations. Excellent news. However now we find that the FY result will be significantly ahead of revised consensus market expectations. That's quite remarkable with all divisions performing well and KBS trading even more strongly than the rest of the group. The strategic decision to diversify last year has really paid off and I expect the group to go from strength to strength as business flow improves due to the economy gradually being unlocked. (Update)


A rather decent FY update with revenue and profit to be ahead of market expectations. In terms of figures this means at least $440m of sales with over $52m coming from electric vehicle customers (a year on year increase of 187%). This is great news as EV sales should be a big growth driver going forwards. In addition the core medical and industrial markets have stabilised which bodes well. This means that the underlying operating profit should exceed $41m which is a solid 30% increase on the $31.6m achieved last year (implying an improvement in margins). In addition the new DE-KA acquisition is trading significantly ahead of the previous year which will meaningfully improve the results for next year if this performance continues. The only sour note is that commodity prices remain strong which is creating input inflation for Volex. They are able to pass these increases onto customers but perhaps with a short lag. Nevertheless management feel that they can defend recently improved margins and frankly if I don't believe that they can do that, by running the business effectively, then I shouldn't be invested. I'm very happy with progress and remain a holder. (Update)

Kainos Group

No numbers in this FY update unfortunately but trading remained strong in the last few months of the year and results should be at the upper end of current market consensus forecasts. I suppose another "above expectations" result would have been nice but forecasts have doubled over the last year which is very impressive. Apparently there is a significant contracted backlog and demand remains robust which is indicative of another strong year ahead. (Update)


This is an excellent year-end trading update with total sales up 31% to 157.5m with the UK and RoW contributing equal revenues. This is an impressive result, given Brexit, and the company are planning to strengthen their European distribution network. At the same time gross margin is up 3.6% to 29.5% which suggests that management have really dealt with the margin issues that arose a few years ago. Together this means that EBITDA will be ahead of market expectations and that the company will end the year in a net cash position. Trading in the new year is good though not up to the exceptional trading seen in April last year - hardly surprising - and as ever the pandemic and Brexit continue to deliver challenges. However I just don't see earnings dropping back 48% from FY21 and I believe that brokers are too cautious in their forecasting. (Update)

RWS Holdings

It's been a while since the last RWS update and happily the first half has played out well despite a 5% FX headwind. Revenue will be £326m with 5 month's contribution from SDL (amounting to £151m). If you adjust by £30m to account for another month you get £356m which is about half of the FY forecast for £706m in sales. Seems on track. Right now FY profits are in-line with expectations even though H1 PBT will be at least £50m which is apparently ahead of expectations. Are management just being cautious given the sensitivity of earnings to exchange rates? The big SDL integration is progressing and, as alluded to previously by management, cost synergies should be around £32m rather than the £15m originally stated. Does this have a direct bearing on bottom-line profits? Lower costs should equal higher margins but it would be interesting to know what costs are being removed. Still at a divisional level all parts of RWS are growing, despite Covid-19 weighing on certain customers, which bodes well for the future. All in all I've been impressed by RWS and Andrew Brode, Chairman, in the past and I have a feeling that I'll be impressed once again in the near future. (Update)

Staffline Group

A solid double update for both the year ended 31 December 2020 and the three months ended 31 March 2021. In a difficult year management quickly reduced their cost base and positioned the business for a return to growth in H2 as the food distribution, retail, e-commerce, and logistics sectors bounced back. As a result all three operating divisions returned to profitability in H2 and total underlying operating profit improved substantially to around £4.8m (ahead of expectations). That's a good result and Q1 has retained this momentum with strong demand and cost savings creating a year-on-year rise of 133% in profits. As things stand the board are confident that FY results are likely to be ahead of expectations. I have no problem believing this statement given how eager people are to get back to work. The only fly in the ointment is that net debt remains high at £55m and that this includes £46m of deferred VAT that will start being paid back from June. The board are evaluating their options with regard to financing and I expect an equity raise to be announced soon. While this will dilute existing shareholders I wonder if the resolution of this issue will actually propel the shares higher? (Update)

Gaming Realms

The historical financials for Gaming Realms are a sea of red and do not suggest that this is a quality enterprise. So why my interest? Firstly this, along with GAN, is a play on the deregulation of on-line betting in the States and a sense that this will provide a multi-year tailwind for gambling companies. Secondly the trend in historical results clearly indicates that earnings have been steadily getting less negative over the last five years with analysts forecasting a small profit for 2020. So how do these results look? Well sales are slightly higher than expected, at £11.4m, while EBITDA is slightly lower at £2.9m and bottom-line EPS is -0.54p rather than the +0.2p we were looking for. Good enough I suppose. More importantly both licensing and social publishing revenues are growing strongly and many new partners have been signed up for Slingo content. As a result licensing revenue is up 60% in Q1 which is a heck of a growth rate. In addition Gaming Realms have licensing applications in for Pennsylvania and Michigan and are preparing to launch in Italy. These are all welcome signs for 2021 and for now the board believe that they are trading marginally ahead of board expectations. While there is an element of jam tomorrow to these expectations there is clear evidence that the board have a clear plan for growth and that this is available to them on numerous fronts. I'm happy to be invested in this journey. (Results)


A positive trading update although without any figures. Indeed it's a very positive update with management "extremely pleased with the profit growth" in the first quarter. Given strong customer demand and continued cost base reductions I'd say there's a fair chance of Computacenter beating expectations in 2021. Set against this US dollar weakness is creating an FX headwind (of ~£4m for the full year) and the recent French acquisition will remain loss-making as it's pulled into shape. Still there's nothing here to suggest that the business will not continue to be successful. (Update)

Driver Group

For a change this is a fairly "meh" statement from one of my holdings. Half-year profits are expected to be slightly lower than those for the same period last year. Underlying this performance are significant challenges from Covid-19 restrictions, key staff members being poached in the APAC region and generally lower activity levels. The latter issue is resolving itself as lockdowns ease and H2 should be a stronger period for the company. It would be nice to have some jam today, if only for the becalmed share price, but the medium-term picture remains unchanged. This is that Driver Group has a refreshed board, is focusing on higher margin expert assignments, and dispute volumes will inevitably rise as countries unlock and construction customers start agitating around the status of their projects. I'm not inclined to increase my position without more positive news but I have no specific concern that my current investment is at risk either. (Update)

Sylvania Platinum

A solid Q3 result for Sylvania with net profit doubling to $41.3m despite a 5% drop in delivered 4E PGM ounces (from 18,363 to 17,420 ounces). The key driver behind this performance was a 38% improvement in the gross basket price from $3,323/ounce in Q2 to $4,576/ounce. The continued rise in the rhodium price delivered a real kick here while the iridium and ruthenium prices hit all-time highs in the quarter. The company take no credit for this tailwind, which is entirely appropriate, and instead focuses on operational issues. Up front they report that inconsistent supply of mine waste has caused a number of problems with certain mines resorting to older, dump waste that is less effectively processed. Management have acted sensibly to deal with these changes, and keep feed tons constant, which is why delivered ounces haven't dropped all that much. Various remedies are being put in place to mitigate these issues and here I'm assuming that management know what they're doing - which seems reasonable given their prior record. Financially the company is doing very well, which cash moving from $67.1m to $102.1m, and will have no difficulty meeting obligations as they fall due. Looking good for now. (Update)

Disclaimer: the author holds, or used to hold, all of the shares discussed here

comments powered by Disqus